Opinion | Motoring & Policy
TL;DR
- The 13 May King's Speech introduced a Highways (Financing) Bill enabling private investment in roads under a Regulated Asset Base model.
- Licence-holders would be able to charge users, with a regulator setting fair-cost standards and a government backstop.
- UK drivers already pay around £42 billion a year in motoring-specific taxes; the strategic-roads spend is roughly £12 billion.
- The political debate has fixated on the toll question; the hypothecation question (where the existing tax goes) is structurally more important.
- Private road finance can work, but only if the existing motoring tax base is reformed alongside, not in addition to.
Published 17 May 2026 | Industry analysis
Key Facts
- Highways (Financing) Bill announced in King's Speech, 13 May 2026.
- Regulated Asset Base model already used in water (Thames Tideway Tunnel) and nuclear (Sizewell C).
- Fuel Duty: 52.95p per litre, frozen since March 2011, due to rise in 2026/27.
- Vehicle Excise Duty receipts: roughly £8.0 billion in 2024/25 (HMRC).
- UK strategic road network: 4,300 miles of motorway and major A-road, ~£12bn annual operating and capital spend.
What the Bill actually does
The Highways (Financing) Bill, announced at the State Opening of Parliament on 13 May, introduces a Regulated Asset Base (RAB) funding model for UK road infrastructure. Under RAB, a private licence-holder finances and operates a piece of infrastructure (a road, a bridge, a tunnel) and recovers its investment through a regulated revenue stream. A government-appointed regulator sets the fair-cost standards. A government backstop steps in if the licence-holder fails financially.
The model is not new. The Thames Tideway Tunnel super-sewer was financed under RAB. Sizewell C is being financed under RAB. The energy networks have used a version of RAB since privatisation. The Bill applies the same approach to roads.
Two operational features of the Bill matter for the debate. First, the user-charging mechanism is permissive, not mandatory. A RAB licence-holder may charge users, but the legislation does not require it; some projects could be financed through availability payments from government instead. Second, the model is project-by-project, not network-wide. The Bill does not enable a comprehensive national road-pricing scheme; it enables specific infrastructure projects to be funded outside conventional Treasury capital budgets.
The toll debate is the wrong debate
The bulk of the political and trade-press coverage has focused on the possibility of tolling. The Dartford Crossing, the Lower Thames Crossing, the M6 Toll and Mersey Gateway are the existing reference points. A new Bill that adds toll capacity to the road network is straightforwardly negative for drivers, the argument runs, particularly given the cost-of-living context.
Two things are missing from this framing. First, the political and economic system the UK currently runs already extracts substantial revenue from drivers and does not return it to roads. Second, the alternative funding model for new road infrastructure is not "free", it is general-fund borrowing repaid through general taxation, which is also paid disproportionately by working-age people who drive.
The £42 billion figure is the relevant anchor. Fuel Duty receipts of around £25 billion, Vehicle Excise Duty receipts of around £8 billion, VAT on fuel of around £8 billion, and Insurance Premium Tax on motor cover of around £1.5 billion combine to roughly £42 billion of motoring-specific tax revenue in 2024/25. Annual UK strategic road network capital and operating spend is around £12 billion. The remaining £30 billion funds general government activity. Motoring is, in fiscal terms, a substantial net contributor.
Why the £30 billion gap matters
Two structural problems sit inside that £30 billion gap.
One: as the vehicle fleet electrifies, Fuel Duty receipts will fall sharply. The Office for Budget Responsibility has flagged this repeatedly. By 2035, with the petrol-and-diesel new-vehicle sales ban biting, Fuel Duty receipts in real terms are projected to fall by 50% or more on current policy. That means the £30 billion the Treasury currently extracts from motoring beyond what it spends on roads is on a structural decline. The Treasury knows it. The political class is largely ignoring it.
Two: the public legitimacy of motoring taxation rests heavily on the implicit (and inaccurate) assumption that drivers' tax pays for roads. Polling consistently shows that voters believe their motoring taxes are hypothecated to roads, even though they are not. As the fiscal arithmetic above shows, the actual ratio is roughly three-to-one against. A user-charging element introduced via a RAB licence does not change the fiscal arithmetic, but it changes the politics. A driver who pays £4 to use a new private bridge will, reasonably, ask why the existing £42 billion in tax is not already covering the bridge.
That is the real reason the Treasury has historically resisted hypothecation. Hypothecation makes the £30 billion gap visible. Once visible, it has to be defended on its own terms, not absorbed into general-fund arithmetic.
A coherent reform would do both things at once
A serious road-funding reform would pair the RAB model with a structural reform of motoring taxation. The economic case for private road finance is reasonable: the UK has a long infrastructure pipeline, public capital is constrained, and the RAB model has delivered the Thames Tideway and is delivering Sizewell C. Bringing private capital into roads is not, on its own, a bad idea.
It becomes a bad idea if it is layered on top of an unreformed motoring tax base, because in that scenario drivers pay twice: once at the pump and the DVLA, again at the toll booth. They will reasonably regard this as double-charging, because in revenue terms it is.
The pairing that would work is: introduce RAB for major new infrastructure, ring-fence a defined share of motoring tax revenue for strategic road spend, and use a road-pricing transition to replace Fuel Duty as the fleet electrifies. Each of those three changes is politically difficult on its own. Together they form a coherent reform. Done in isolation, the Bill as introduced solves the Treasury's capital-budget problem and leaves drivers with the political bill.
The signal worth watching
The Bill text is not yet published in full. The shape of the regulator (DfT? Office for Road and Rail? a new body?), the scope of the user-charging clauses, and the relationship between RAB licences and the existing strategic road network operator (National Highways) are all unresolved. The detail of the Bill will matter more than the King's Speech framing.
For the motor insurance, automotive and broader transport industries, the live question is not whether tolls are coming on existing roads. The question is whether the political conversation around the Bill triggers, finally, the wider reform of motoring taxation that has been overdue for at least a decade. If the Bill stays narrow and the £30 billion gap stays hidden, the policy is a Treasury win and a driver loss. If the Bill widens the political space for hypothecation and road-pricing transition, it could be the most consequential piece of motoring legislation since 1990. The next eighteen months will show which.
FAQ
Does the Bill mean tolls are coming to all UK roads?
No. The Bill enables a Regulated Asset Base model for specific infrastructure projects. A RAB licence-holder may charge users, but the legislation does not impose tolls on existing roads or create a national road-pricing scheme. Each project under the model is approved individually.
What is the Regulated Asset Base (RAB) model?
RAB is a funding model in which a private operator finances and runs a piece of infrastructure and recovers its investment through a regulated revenue stream. The regulator sets fair-cost standards. RAB has been used for the Thames Tideway Tunnel, is being used for Sizewell C, and is the established model for UK energy networks.
How much do UK drivers already pay in tax?
Around £42 billion a year in motoring-specific taxes: Fuel Duty (around £25 billion), Vehicle Excise Duty (around £8 billion), VAT on fuel (around £8 billion) and Insurance Premium Tax on motor cover (around £1.5 billion). Annual strategic road spend is around £12 billion.
Is motoring tax revenue hypothecated to road spending?
No. Motoring tax receipts flow into the general fund. The Treasury makes road-spending decisions through the spending review process, not as a fixed share of motoring tax. The 2018 National Roads Fund created a partial hypothecation of Vehicle Excise Duty receipts to road spending, but this represents only a fraction of total motoring tax revenue.
Will Fuel Duty disappear as cars electrify?
The Office for Budget Responsibility projects that Fuel Duty receipts in real terms will fall by 50% or more by 2035 on current policy, as electric vehicles displace petrol and diesel. The Treasury has signalled that some form of road pricing will eventually replace Fuel Duty as the fleet electrifies, though the timing and design are not yet set.
What is the first project likely to use RAB for roads?
The Bill text is not yet published, so the first project under the new RAB framework is not confirmed. The Lower Thames Crossing has been identified in trade-press commentary as a candidate, alongside other major capacity projects on the strategic road network.
Sources
- GOV.UK, King's Speech 2026 background briefing
- Office for Budget Responsibility fiscal outlooks
- HM Revenue and Customs receipts statistics
- National Highways strategic road network spending data
Photo by Ross Sneddon on Unsplash.
